Market Report: Carlton and Cookson whispers pry traders from banking drama

THE TELEVISION group Carlton and the engineer Cookson yesterday provided traders with a welcome diversion from the banking merger mania amid intriguing whispers of corporate action.

The odd couple fought a valiant battle to grab the attention of a market who had eyes only for the soaring financials stock.

At the end of a terrific day for the FTSE 100, Carlton was 25.75p higher to 436.75p amid talk of a possible deal with its French rival Canal+. The stock was boosted by a late roguish trade at 461p but market watchers said that the rise was underpinned by genuine buying.

Cookson finished 11p better at 182p - one of the day's best midcappers - on rumours of a management buyout.

In many dealers' eyes, the Carlton story was sexier than another MBO for an undervalued engineer. The TV blue chip could be on the verge on receiving an approach from its Gallic counterpart Canal+. Fans of the story said that the French group could be interested in a joint venture between its own digital outfit Canal Satellite and OnDigital, the digital TV business co-owned by Carlton and Granada. An Anglo-French digital tie- up would make strategic sense. Both channels are struggling in their domestic markets and could benefit from the synergies and increased marketing muscle of a cross-border deal.

The only snag is that the French conglomerate Vivendi, largest shareholder in Canal+, also owns a stake in OnDigital rival BSkyB, up 8p to 559p. But the possible conflict of interest did not deter supporters of the Canal+ rumour. They pointed to Vivendi's statement that it is in no rush to merge BSkyB and Canal+. They also noted that the French conglomerate has been looking to sell its 9 per cent of its near-49 per cent stake in Canal+ to fund foreign expansion. A TV joint venture and equity swap with Carlton could be the ideal answer.

Carlton's OnDigital co-owner, Granada, surged 22p to 560p ahead of an analysts' meeting today. Industry experts are expecting a positive update on the group's TV and hotels businesses. A purchase of a stake in a football club is also possible.

As for Cookson, traders were excited by reports that rival Charter, 22.5p higher at 355p, could fall to a pounds 400m MBO. According to the market's wisdom, Cookson could be the next in line to go private especially if the shares stay below their 243p yearly peak.

The rest of the market had a storming session thanks to a strong Wall Street and the financials' bid frenzy. The FTSE 100 regained the psychologically important 6,000 level and closed 141 higher at 6078.6 - its biggest rise in five weeks. The smaller indices were more subdued, with the FTSE 250 ending 36.1 higher to 5699.9 and the Small Cap falling 1 to 2683.8.

The heavyweight banking sector's strength contributed some 60 points to the rally as the market was flooded with takeover rumours. As one dealer put it, the institutions were "out with their buying boots" picking up banks from the opening bell.

NatWest Bank soared 122p to 1,476p on strong rumours that the bid from Bank of Scotland, 45.5p higher at 795.5p, could be trumped by Royal Bank of Scotland, 115p better at 1391p, HSBC, up 23p to 726p, or foreign rivals. Lloyds TSB put on another 59p to 786.5p on hopes of a deal, possibly with Legal & General, 3.75p better to 184.25, which is also rumoured to be in the sights of Abbey National, 60p higher at 1146p. Sitting duck Norwich Union also rose 1.75p to 461.25p.

Bid rumours were not confined to the financials. Allied Domecq jumped 23p to 348.25p on revived whispers of a strike from France's Pernod Ricard, US rival Bacardi or Canadian giant Seagram.

Mining stocks Anglo American, up 304p to 3,531p, and Billiton, 11.25p higher at 252.75p, were buoyed by an international freeze on gold sales. Minnows Gold Mines of Sardinia, 3.5p better at 21.75p, and Glencar Mining, 4.25p to 28.75p also benefited.

Retailers had an odd day. Marks & Spencer rose 14.5p to 315.5p despite a profit warning as analysts said that worst is over. Storehouse also warned on earnings and also rose 4p to 92.5p on renewed talk of a bid from entrepreneur Philip Green or Debenhams, down 14p to 316p. Arcadia, down 11.75p to 158.25p and Iceland, 15p lower to 285p, were unsettled by their rivals' comments on the poor state of the High Street. Drug group Medeva shot 7.5p higher to 140.5p on hopes of a hostile bid from Irish peer Elan, unchanged at 1900p. Rival Axis-Shield firmed 2.5p to 380p on talk that a positive advice from broker Nomura could be followed by a bullish note from Warburg Dillon Read. Cement-maker Rugby firmed 0.75p to 95.5p on rehashed whisper of a foreign bid.

Glass-maker Pilkington cracked 5.25p lower to 109.75p as the trading statement did not bring the expected MBO. Picture booths operator Photo- Me clicked 215p higher to 1402.5p on talk that its strategic review could lead to a bid.

The construction tiddler Multi Equipment Rental was unchanged at 25.25p despite a 29 per cent rise in interim profits and an upbeat trading statement.

Explorer Dana Petroleum confirmed its Dutch gas find and rose 1p to 13p.

SEAQ VOLUME: 1.09bn

SEAQ TRADES: 81,686

GILTS INDEX: 102.96 -0.64

BRACE YOURSELVES, super bull is in town. Ralph Acampora, the ever- optimistic technical analyst at America's Prudential Securities with a knack for getting it right, was in London yesterday to preach to hundreds of UK converts. True to form, Mr Acampora expects the Dow to go higher. Much higher. He is forecasting the US index will more than double to reach 20-25,000 points in five to eight years, driven by low inflation and high productivity.

THE AILING Freeserve, results today, got some much-needed help from Merrill Lynch. The stock rose 15p to return to the 150p offer price after the broker started coverage by advising clients to buy the Internet provider as a long-term investment. Merrills believes Freeserve will be one of three main Net portals to win the battle for the hearts and minds of the mouse-clicking public. It expects first-quarter revenues of pounds 2.9m and 1.4 million active users.